What’s next for London’s prime market?

While the prime London market is set to continue to flourish, it is the lower to middle end of the rental market that is likely to see the most changes in the coming months and years. The increasing burden of legislation and regulation has made the property market less appealing for would-be investors and existing property owners.

The recent announcement of the 50% cut in capital gains tax annual exemption from £12,300 to £6,000 in 2023-24 and again to £3,000 in 2024-25, along with the ending of stamp duty cuts in March 2025 will both affect landlords. I believe that this tax hike alone will discourage landlords from investing at a time when that is exactly what the market needs them to do.

We have already seen some landlords exit as their yields have been squeezed, and others are considering their position while waiting for the next wave of Government intervention. The threatened scrapping of Section 21 no-fault evictions and the possible regulation of tenancy terms have certainly caused concern amongst Home Minders’ landlords.

I think that the Government may row back on these proposals as we have already seen a reduction in properties to let. This reduction in supply of rented properties has led to a rise in rents as tenants chase fewer available properties. This is certainly not the Government’s intention, so a policy rethink is required here.

I believe that the first quarter of 2023 will see a stabilising of property sale prices and a smaller rise in rents than we have seen recently, as more tenants decide to stay put, wait, and see how the market develops.

London property prices always seem to buck the trend in the rest of the country, but we are seeing a slowdown in the rate of increase which will continue into the first half of 2023. Similarly, rent increases have been more modest recently, and I expect this to continue.